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Journal of Health Politics, Policy and Law 25.1 (2000) 27-44
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Consumers, Insurers, and Market Behavior *
Deborah J. Chollet
In 1997, an estimated 16 million Americans (7 percent of the population under age sixty-five) were covered all or part of the year by an individual health insurance plan not associated with an employer. This article examines exactly who is in the individual insurance market and how consumers in this market compare with the uninsured and employer-insured populations. Differences between the operation of the individual and group markets are considered, including variations related to the structure of sellers in the market. Finally, state regulation of individual insurance markets is considered, and the article offers a rationale for the different impacts of regulation that have occurred in various states. The article concludes with some thoughts about information that might improve public policy governing private health insurance with particular reference to the individual insurance market.
Who Buys Individual Insurance?
The average consumer of individual insurance is very much like the average of the general population. Specifically, most are adults of childbearing age (aged eighteen to forty-four) or children. They live in metropolitan areas, in families headed by a full-time full-year wage or salary worker, and have moderate or high family income. [End Page 27]
However, the population that buys individual health insurance is diverse, and examination of the average is in some respects misleading. Although they are not the majority, individual insurance consumers are more likely than the general population to be older (aged fifty-five to sixty-four) and to live in smaller cities or rural areas. Also, they are more likely than the population at large to be in families headed by part-time, part-year, or self-employed workers. A surprising number are poor or near poor.
This section reviews the demographic and economic characteristics of the population with individual insurance. The data are taken from the March 1998 Current Population Survey (CPS), and reflect questioning about private health insurance that respondents "purchased directly," other than from a present or past employer. This coverage is presumed to be individual, nongroup insurance, although it may include group coverage purchased through an association.
While nearly two-thirds of the individually insured population are adults of childbearing age (aged eighteen to forty-four) or children, the individually insured population is distinctly older than the employer-insured population, and also older than the population that is uninsured (Table 1). Adults comprise a larger percentage of the individually insured population (77 percent) than of either the employer-insured population (71 percent) or the uninsured population (75 percent). This population also includes more older adults than either the employer-insured population, in particular, or the uninsured population. In 1996, 36 percent of people with individual coverage were older than forty-five, and 18 percent were older than fifty-five. In contrast, only 26 percent of the employer-insured population were older than forty-five, and just 10 percent were older than fifty-five. Among the uninsured, just 18 percent were older than forty-five.
The rate of individual health insurance coverage is surprisingly equal across the population, irrespective of family income (Table 2). In near-poor families (those with income between 100 percent and 200 percent of the federal poverty standard), 6 percent had individual health insurance [End Page 28] [Begin Page 31] in 1997. 1 This rate is nearly the same as that reported among adults and children in families with incomes above 400 percent of the poverty standard (7 percent). The relatively high rate of individual insurance purchase among people with relatively low family income is consistent with less access to employer-based coverage among this population and, therefore, greater demand for individual insurance despite obvious constraints on their ability to afford it.
Family income among the individually insured population is low compared to the income distribution of the employer-insured population, but much higher than family income among the uninsured. In 1997, 40 percent of the individually insured population were in families with...